The Morning Brief: Citadel’s Funds Post Gains in July
Kenneth Griffin’s Chicago-based Citadel has narrowed year-to-date losses in its various funds following strong gains in July. Its flagship Wellington fund returned 2.7 percent last month and is now down 1.8 percent for the year. The multistrategy fund posted gains in all of its strategies, led by equities, fixed income, quantitative strategies and credit. Citadel Tactical Trading returned 3.17 in July and is now down 2.05 percent for the year. That fund also posted gains in its equities and quant strategies. Citadel Global Equities gained 2.12 percent in July and is now down 3.80 for the year.
Another big pension fund is slashing its exposure to hedge funds. The New Jersey State Investment Council voted to reduce its hedge fund investments by 52 percent, from 12.5 percent of total assets to 6 percent, according to Bloomberg. Its hedge fund portfolio lost 3 percent through May.
The pension, which had $9.1 billion invested in hedge funds through the end of May, had been under pressure from labor unions to divest from hedge funds, Bloomberg reports. Union leaders had complained about the risk associated with hedge fund investments as well as the hefty fees they charge. “It sends a message to the hedge fund community that the world has changed,” New Jersey council Chairman Tom Byrne said at the meeting, according to Bloomberg. “Public funds aren’t going to just pay whatever fees they are charging.”
Earlier this year the New York City Employees Retirement System (NYCERS) decided to end its $1.5 billion hedge fund investment program.
Keith Meister’s New York-based activist firm Corvex Management told energy firm Williams Companies, a longtime target, in a regulatory filing that it wants the company to add to or replace the company’s existing board and to do so within the next year. The filing also said that Soroban Capital Partners, another New York activist firm, is no longer working with Corvex to agitate for change at the company. Williams Companies said earlier this week that it wants to continue operating as a stand-alone company after Energy Transfer Equity officially called off its merger with Williams last month.
Also in a regulatory filing on Wednesday, Corvex said it trimmed its stake in title insurance company Fidelity National Financial. The hedge fund firm now owns approxmiately 13 million shares of the company, amounting to a 4.8 percent stake. That’s down from about 19 million shares held at the end of the first quarter.
Steven Mnuchin, Donald Trump’s campaign finance manager and the founder of a small hedge fund firm, Dune Capital Management, went on CNBC on Wednesday to discuss the Trump campaign’s revelation that it raised $80 million in July. Mnuchin saind the number refers to $64 million of small-dollar donations and another $16 million from within the Republican National Committee. Trump’s opponent, Democratic nominee Hillary Clinton, raised $90 million during the month. Trump has pumped $56 million of his own money into the race, according to CNBC. On air, Mnuchin dodged a question on why Trump won’t release his tax returns (even though every candidate has done so for the last 40 years), saying, “I’m not really sure what the relevance is” of releasing the returns.
The fundraising success comes at a time when Trump’s campaign appears to be in a tailspin. Prominent Republicans including Hewlett Packard CEO Meg Whitman have withdrawn their support for Trump in the wake of his incendiary comments insulting Khizr and Ghazala Khan, the Muslim parents of a U.S. army captain who was killed in Iraq. Khizr Khan delivered a blistering attack on Trump at last week’s Democratic convention.
Following Trump’s rebuttal, in which he questioned why Ghazala Khan did not speak and implied that her faith presented her from doing so, several prominent Republican leaders including Senator John McCain and House Speaker Paul Ryan publicly condemned the remarks. Trump in turn refused to endorse McCain and Ryan in their primary races. Whitman went as far as to call Trump a “dangerous demagogue” and said she is instead supporting Hillary Clinton for President. The controversy hasn’t swayed Skybridge Capital founder and Trump bundler Anthony Scaramucci, who tweeted, “96 more days of demonization until we have President-elect @realdonaldtrump #goodtimes”.
Meanwhile, Baupost Group founder Seth Klarman became the latest billionaire hedge fund manager to slam Trump. Klarman told Reuters, “His words and actions over the last several days are so shockingly unacceptable in our diverse and democratic society that it is simply unthinkable that Donald Trump could become our president.” Klarman added in an emailed statement to the newswire that Trump’s suggestion “that the election will be rigged is particularly dangerous.”
Blue Pool, a Hong Kong-based hedge fund-turned-investment adviser that manages money on behalf of ultrawealthy clients including two top Alibaba Group Holding Executives, is in talks to seed a hedge fund started by a former Balyasny Asset Management investment pro, according to a Bloomberg report. Avinash Abraham, who worked for Balyasny in Asia until earlier this year, is starting Torq Capital Management, a market neutral pan-Asia hedge fund, in November. Blue Pool, which manages money for Alibaba Chairman Jack Ma and Vice Chairman Joseph Tsai, once operated as a hedge fund managing more tha $1 billion but reduced outside capital and now invests on behalf of clients either internally or through outside funds. It also seeds startup asset management firms from time to time, according to the report.
Insurance giant American International Group redeemed from event-driven and long-short hedge funds last quarter as part of its plan to reduce its hedge fund exposure overall, Bloomberg reports. The firm cut its event-driven hedge fund investments by 41 percent, to $700 million, and cut its long-short hedge fund investments by 25 percent, to $2.24 billion, the report said. AIG CEO Peter Hancock said earlier this year that he planned to reduce the company’s investments in hedge funds by about 50 percent, citing dissatisfaction with performance.